He backed the full legalization of abortion and the repeal of laws that criminalized drug use, prostitution and homosexuality. He attacked campaign donation limits and assailed the Republican star Ronald Reagan as a hypocrite who represented “no change whatsoever from Jimmy Carter and the Democrats.”

It was 1980, and the candidate was David H. Koch, a 40-year-old bachelor living in a rent-stabilized apartment in New York City. Mr. Koch, the vice-presidential nominee for the Libertarian Party, and his older brother Charles, one of the party’s leading funders, were mounting a long-shot assault on the fracturing American political establishment.

The Kochs had invested hundreds of thousands of dollars in the burgeoning libertarian movement. In the waning days of the 1970s, in the wake of Watergate, Vietnam and a counterculture challenging traditional social mores, they set out to test just how many Americans would embrace what was then a radical brand of politics.

It was the first and only bid for high office by a Koch family member. But much of what occurred in that quixotic campaign shaped what the Kochs have become today — a formidable political and ideological force determined to remake American politics, driven by opposition to government power and hostility to restrictions on money in campaigns.

That election also handed the Kochs their first political setback, driving them to rethink their approach to libertarian ideas. Since then, they have built a powerful network of political nonprofit groups that is exempt from most campaign reporting requirements and contribution limits but will spend tens of millions of dollars to influence the 2014 election. They have exerted enormous influence on American politics, battling government regulation and casting doubt on the urgency of climate change. Instead of replacing the Republican Party, they have helped to profoundly reshape it.

“The 1980 campaign was instructive in helping them learn what ideas resonated,” said Robert A. Tappan, a Koch Industries spokesman, “and at the same time, giving them an understanding of the implications of the electoral political process.”

Business Meets Politics

The Kochs, heirs to a family oil refining and marketing business, were unlikely entrants in a presidential campaign.

Politics was a dangerous game for those in business, Charles Koch argued in a 1974 speech to libertarian thinkers and business leaders in Dallas. Subsidies and special treatment demanded by corporations had helped turn Americans against free enterprise. Business had colluded with the Nixon administration to design price controls and other “socialistic measures.”

The most effective response was not political action, Mr. Koch argued, but investment in pro-capitalist research and educational programs.

“The development of a well-financed cadre of sound proponents of the free enterprise philosophy is the most critical need facing us today,” he said, according to a copy of his speech in a Libertarian Party archive at the University of Virginia, one of thousands of documents reviewed by The New York Times for this article. The Times was alerted to the archive by American Bridge, a liberal political organization that has been critical of the Kochs.

‘Anti-Capitalism and Business’

The speech was printed on pamphlets and preserved at the University of Virginia Library.

The University of Virginia Library/Photo by Daniel Rosenbaum for The New York Times

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By the end of 1974, Mr. Koch had helped found what would become the Cato Institute, today one of the country’s leading libertarian research institutions. He was joined in that effort by Ed Crane, chairman of the three-year-old Libertarian Party. The two men believed that libertarian ideas had to be more accessible to the average person if they were to change the country. Over dinners at Charles Koch’s house in Wichita, Kan., and in correspondence with both brothers and their mother, Mr. Crane worked to persuade the family that a vibrant party organization was critical to advancing that goal.

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Mr. Koch said that the Libertarian Party was a “great concept,” but that Republicans have a great chance of success.Credit
Mark Lennihan/Associated Press

The family would become the Libertarian Party’s most important donors.

But their other consuming interest was business: Charles Koch, then in his first decade as president of Koch Industries, had aggressively expanded the firm’s holdings in oil refineries, petroleum products and commodities, while David Koch worked as an executive at the company’s engineering subsidiary.

As the brothers became more politically active, Koch Industries repeatedly butted against the federal government’s new energy regulations. One month before Charles Koch’s speech in Dallas, a federal audit found that Koch and two other companies had broken federal oil price controls. In 1975, a Koch subsidiary was cited for $10 million in overcharges on propane gas.

The family’s frustrations were captured in a fund-raising letter that Charles Koch wrote on behalf of the 1976 Libertarian presidential candidate, Roger MacBride, a co-creator of the “Little House on the Prairie” television series. Mr. Koch excoriated Presidents Richard M. Nixon and Gerald R. Ford for backing price controls, and attacked legislation to impose fuel economy standards as “one of the many demonstrations of the bankruptcy of the Republican alternative to Democratic interventionism.”

‘Rocky Mountain Oilman’

Charles Koch wrote this letter in support of the 1976 Libertarian Party presidential candidate, Roger L. MacBride. Mr. MacBride appeared on the ballot in 32 states, but only drew 173,011 votes in the general election.

The University of Virginia Library/Photo by Daniel Rosenbaum for The New York Times

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New Financing Tool

The Supreme Court handed the Kochs an important weapon in a 1976 decision in Buckley v. Valeo. The court opened two loopholes in a two-year-old campaign finance law that had placed tight controls on what candidates, parties, and private individuals could spend on campaigns: A candidate could spend an unlimited amount of his or her money running for office, and an individual was free to spend an unlimited amount of money promoting candidates so long as the spending was not coordinated with them.

The next three years witnessed the birth of the Koch political apparatus. Charles Koch sought to recruit like-minded businessmen who would invest in the libertarian cause, an embryonic version of the Koch-supervised donor club that poured $400 million into the 2012 campaign.

The brothers and Mr. Crane saw other hopeful signs. In California’s 1978 state election, voters approved Proposition 13, sharply reducing property taxes, and gave Ed Clark, the Libertarian candidate for governor, 5 percent of the vote.

They also became closely involved in the party’s day-to-day operations. David encouraged party leaders to develop policies opposing President Carter’s energy proposals. Charles required detailed accounting of spending and chided party officials when they fell behind schedule on direct mail. But, within the family, Charles and David Koch’s political activities were becoming a point of contention.

Most of the family’s enormous wealth was vested in Koch Industries shares, which Charles Koch was determined to hold privately to avoid regulations over publicly traded companies. William Koch, David’s twin, felt that Charles, as the company’s chief executive, was not paying enough dividend income to the family, and complained of having to borrow money to buy a house.

“Charles was giving as much to the Libertarians as he was paying out in dividends,” William told The Times in a 1986 interview. “Pretty soon we would get the reputation that the company and the Kochs were crazy.”

In March 1979, Mr. Clark declared that he would seek the Libertarian Party’s presidential nomination. A lawyer for Atlantic Richfield Corporation, he was the candidate many libertarians had been waiting for: polished, substantive and well spoken.

The goal was “to try to run somebody who looked like an actual politician, a normal person, not your typical ‘Star Trek’ convention wannabe like most party members were,” recalled Bruce Bartlett, a supply-side economics expert who volunteered as a speechwriter for the Clark campaign.

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A campaign button for Mr. Clark and Mr. Koch's 1980 campaign.Credit
Libertarian Party

But a Clark presidential campaign needed money and a running mate. The Kochs could provide both. If one of the brothers joined the ticket, he could — thanks to the Buckley loophole — donate as much as he wanted to the campaign, finally giving the ticket enough cash to run ads and seek a ballot spot in all 50 states. David Koch announced his candidacy in August 1979.

The post-Watergate campaign finance law “makes my blood boil,” Mr. Koch wrote in a letter to party members. He had a simple proposal: “As the Vice-presidential nominee of the Libertarian Party I will contribute several hundred thousand dollars to the Presidential campaign committee in order to ensure that our ideas and our Presidential nominee receive as much media exposure as possible.”

A Vice-Presidential Pitch

This is the second page in a two-page letter from David Koch offering his candidacy for Libertarian nomination for Vice President.

The University of Virginia Library/Photo by Daniel Rosenbaum for The New York Times

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In September 1979, some 2,000 Libertarians gathered at the Bonaventure Hotel in Los Angeles. Some had grown hostile to the Kochs, Mr. Crane or both, viewing them as controlling. Mr. Clark was accused of being a puppet of the Kochs — a charge that echoes today in attacks on the brothers that are a centerpiece of the Democrats’ 2014 campaign strategy.

On the convention’s second day, Mr. Clark addressed delegates to rebut the criticism. David Koch offered a chance “to expose the federal election laws as a sham,” he said. Charles Koch’s financial support of the party was “not evidence of a takeover, but rather of his commitment to libertarianism.”

The Clark-Koch ticket easily won the party’s support. Taking the stage with Mr. Clark on the final day of the convention, David Koch joked about his ambivalence.

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“I feel if I practiced I’m liable to become a politician, and I have a lot of mixed feelings about that,” he told the crowd, according to an account published in The Libertarian Review. He denounced the “harassment” of Koch Industries and implored the activists to make the party “a force that will roll back the coercive force of government.”

Family Discord

David Koch became an enthusiastic campaigner. He spoke on college campuses, before groups of business executives and at rallies for grass-roots libertarian activists. The ticket drew particular notice in Alaska, where sentiment was rising against federal takeovers of land. All told, Mr. Koch campaigned in 27 states.

“He liked it, and he thought he got a good response, so he did more and more of it as time went on,” Mr. Clark recalled in a telephone interview. Questions about the Kochs’ motives arose on the trail. A campaign document written to prepare Mr. Clark for tough questions from the press included a section on the ticket’s close ties to the oil and gas industry.

“Most of your campaign is financed by the oil-billionaire Koch family,” read the hypothetical question, which continued: “Wouldn’t a Clark administration simply be ‘Rule by Big Oil’?”

Talking Points

Mr. Clark was given this list of questions he might be asked on the campaign trail about his relationship with the Koch

The University of Virginia Library/Photo by Daniel Rosenbaum for The New York Times

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Koch Industries’ clashes with the federal government were also intensifying. The Department of Energy continued to audit the company for violating federal oil price controls and overcharging retail energy customers.

In June 1980, The Wall Street Journal reported that Koch Industries had been subpoenaed as part of a federal criminal investigation into fraudulently obtained oil and gas leases in Wyoming and other Western states. That August, Koch Industries sued to block federal regulators from applying a rule that would have cut output at the firm’s lucrative Minnesota refinery.

Photo

Letters and other documents in a Libertarian Party archive at the University of Virginia shed light on Mr. Koch’s efforts in the 1980 presidential campaign.Credit
Daniel Rosenbaum for The New York Times

In an energy policy speech that May in Portland, Ore., David Koch railed against what he saw as overregulation. Presidents Nixon and Carter had bequeathed an “Alice in Wonderland” energy policy, he argued, a mix of subsidies and price controls that had stymied market forces and caused high prices and shortages.

The campaign drew interest from many opinion writers and some local press coverage, but it struggled to be taken seriously by larger outlets. One of the most extensive stories about the campaign appeared in Ambassador, the in-flight magazine of Trans World Airlines.

David Koch ultimately contributed about $2.1 million, more than half the campaign budget. But the costs began to wear on his siblings, Mr. Koch recounted in an interview with New York magazine. In September 1980, at a rally in Los Angeles, Mr. Crane and Charles Koch shared an elevator with Melinda Pillsbury-Foster, a libertarian activist, who overheard Charles Koch grumbling that his brother was dipping into his investments to pay for the effort.

“Charles was horrified that David had actually had to spend capital instead of just some of the interest on some of his money,” said Ms. Pillsbury-Foster, who became a critic of the brothers’ involvement in the libertarian movement.

‘Free Up the Energy System’

The speech was given by David Koch at the Benson Hotel in Portland, Ore.

The University of Virginia Library/Photo by Daniel Rosenbaum for The New York Times

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But in November, Mr. Clark and Mr. Koch won 921,128 votes, more than any earlier Libertarian ticket but barely more than 1 percent. The breakout minor candidate that year was John Anderson, while Ronald Reagan built a coalition of social conservatives, foreign policy hawks, disaffected Democrats and traditional conservatives that dominated American politics for the next decade.

Discord within the family grew, and just before Thanksgiving, William Koch tried to seize control of the company in a boardroom coup. He accused Charles of mismanaging the firm and set in motion a bitter legal battle. The Clark-Koch campaign ended the year about $140,000 in debt.

“As a candidate, meeting only libertarians, it seemed to me that everyone was voting for us,” David Koch wrote in a letter to raise money to clear the party’s debts. “We all got a little too optimistic.”

Within a few years, a new faction won control of the Libertarian Party, and Charles and David Koch gradually withdrew.

Debt Relief

This is the second page of a letter sent by David Koch asking for help in clearing the debt to the Clark campaign. The first line of the letter read, “I’m asking you to make a tough choice.”

The University of Virginia Library/Photo by Daniel Rosenbaum for The New York Times

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But the two brothers did not leave politics. In 1985, the Kochs and a new adviser, Richard Fink, formed Citizens for a Sound Economy, a free enterprise-oriented group that evolved into Americans for Prosperity, the organization today led by David Koch that is the centerpiece of the brothers’ political activity. This year, it will spend a reported $125 million on the midterm elections, most of it aimed at defeating Democrats.

They have also worked to fulfill Charles Koch’s vision for a “well financed cadre” of free market proponents, funding think tanks and pro-free market research, endowing professorships, and providing money for internships and scholarships. Between 2007 and 2012, according to one analysis, Koch family foundations contributed $30.5 million to 221 colleges and universities.

Today, the donor club overseen by the Kochs, known as Freedom Partners, generates hundreds of millions of dollars each election cycle. Since 1980, the Republican Party has moved closer to the Koch family’s views on government regulation. Its rising members now court the Kochs and like-minded donors at twice-yearly “seminars” that the brothers organize. In 2012, David Koch was a delegate to the Republican National Convention.

“I think the Republican Party has a great chance of being successful and that’s why I support it,” Mr. Koch told reporters at an American Prosperity reception in Tampa, Fla., that year. “The Libertarian Party is a great concept. I love the ideals, but it got too far off the deep end, and so I dropped out.”

Correction: May 17, 2014
An earlier version of this article, when giving the vote total for the 1980 Libertarian Party ticket, misidentified the presidential candidate. It was Ed Clark, not Ed Crane.

Kitty Bennett contributed research.

A version of this article appears in print on May 18, 2014, on Page A1 of the New York edition with the headline: Quixotic ’80 Campaign Gave Birth to Kochs’ Powerful Network. Order Reprints|Today's Paper|Subscribe